Press Release: IMF Approves Third Annual Loan for the Kyrgyz Republic Under ESAF

March 27, 1997

The International Monetary Fund (IMF) today approved the third annual loan under the Enhanced Structural Adjustment Facility (ESAF)1, in an amount equivalent to SDR 32.25 million (about US$44 million), to support the Kyrgyz Republic’s economic program in 1997. The IMF also approved an extension, to March 31, 1998, of the commitment period for the loan, which is available in two equal installments.


The recovery in output in the Kyrgyz Republic has exceeded expectations, with real GDP growth rising to 5.6 percent in 1996 from 1.3 percent in 1995, led by a sharp increase in agricultural output. On the other hand, there was no progress in reducing inflation, which increased to 35 percent in 1996 from 32 percent in 1995, despite a steep reduction in the budget deficit and its domestic borrowing requirements.

In the area of structural reforms, the Kyrgyz Republic has carried out an ambitious program, which in 1996 included a comprehensive restructuring of the financial sector, further advances in privatization and enterprise restructuring, as well as a range of reforms in the legal system and the agricultural sector.

The 1997 Program

The government’s 1997 economic program, which is supported by the IMF under the third annual ESAF loan, builds on the Kyrgyz Republic’s achievements in macroeconomic stabilization. The key objectives for 1997 are economic growth of 7 percent; a reduction in end-of-period inflation to 17 percent in 1997 from 35 percent in 1996; and a build up in the coverage of gross international reserves from 2.0 months of imports in 1996 to 2.8 months of imports in 1997.

To achieve these ends, the cash budget deficit is targeted to decline to 5.3 percent of GDP in 1997, from 6.4 percent of GDP in 1996. Revenues are expected to be unchanged at 17 percent of GDP and expenditures to fall by one percentage point of GDP to 22.4 percent of GDP. Monetary policy aims at containing the growth in broad money. The Kyrgyz Republic will maintain a floating exchange rate with intervention aimed at smoothing seasonal pressures on the som.

Structural Reforms

The 1997 economic program contains a wide range of structural reforms covering privatization and demonopolization, enterprise restructuring and governance, and agriculture. The privatization program for 1997 envisages the completion of the coupon and cash auction under the mass privatization program by end-1997. To address the issue of corporate governance, the government has initiated a program to improve the management and accountability of public enterprises. The legalframework for private farms will be strengthened. Moreover, the budget process and intergovernmental financial relations are being restructured, together with substantial reforms to the financial sector.

Addressing Social Needs

Reforms of the system of social protection are being undertaken to enhance the efficiency and cost-effectiveness of the delivery of social services. Reforms will focus on refining the targeting of benefits while improving the quality of basic social services.

The Challenge Ahead

The medium-term outlook for the Kyrgyz Republic is promising as long as the reform momentum is maintained and continues to be supported by the international financial community. The authorities’ commitment to the reform effort will help to consolidate the gains already made in macroeconomic stabilization and solidify the prospects for sustained economic growth.

The Kyrgyz Republic joined the IMF on May 8, 1992; its quota2 is SDR 64.5 million (about US$89 million); its outstanding use of IMF credit currently totals SDR 96 million (about US$132 million).

Kyrgyz Republic: Selected Economic Indicators





(Percent change)

Real GDP





Consumer prices (end of period)





(Percent of GDP)

Cash budget balance (deficit-)





External current account balance (deficit-)***





(Months of Imports)

Gross international reserves





Sources: Kyrgyz authorities; and IMF staff estimates and projections.
***Including the operations of the Kumtor gold project.

1 The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growthprospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period.

2 A member’s quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.


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